AMT Fix, Tax Extenders Could Add $3 Trillion to Debt

The Congressional Budget Office has released an estimate of the budgetary effects of President Obama’s proposed budget for fiscal year 2011 and found that some of the tax cuts could add another $3 trillion to the national debt over the next 10 years.

The main contributors would be the president’s proposal to keep the AMT from expanding to millions more middle-class taxpayers, and to extend some of the 2001 and 2003 tax cuts that are scheduled to expire at the end of this year.

“The President’s proposals to index the AMT for inflation and to extend various tax provisions contained in [the Economic Growth and Tax Relief Reconciliation Act of 2001] and [Jobs and Growth Tax Relief Reconciliation Act of 2003] would have, by far, the greatest budgetary impact,” wrote CBO director Douglas W. Elmendorf. “Over the next 10 years, those policies would reduce revenues and boost outlays for refundable tax credits by a total of $3.0 trillion.”

Elmendorf also sees increases in the federal budget deficit in the short term from the proposals. “If the President’s proposals were enacted, the federal government would record deficits of $1.5 trillion in 2010 and $1.3 trillion in 2011,” he wrote. “Those deficits would amount to 10.3 percent and 8.9 percent of gross domestic product (GDP), respectively. By comparison, the deficit in 2009 totaled 9.9 percent of GDP.”